How is the momentum that we learned in physics, related here in trading?

<p id="isPasted">The concepts of momentum in physics and trading share some similarities but also have important differences. Here's a breakdown:</p><p><strong>Similarities:</strong></p><ul><li><p>Direction and magnitude:&nbsp;In both physics and trading,&nbsp;momentum refers to the direction and magnitude of a movement.&nbsp;In physics,&nbsp;it's an object's mass multiplied by its velocity.&nbsp;In trading,&nbsp;it's often measured by price changes over time.</p></li><li><p>Inertia:&nbsp;Both systems tend to maintain their current state of motion (upward or downward) unless acted upon by external forces.&nbsp;In physics,&nbsp;this is due to inertia,&nbsp;while in trading,&nbsp;it can be attributed to factors like trend continuation patterns or investor sentiment.</p></li><li><p>Acceleration: Momentum increases can lead to further acceleration in the same direction.&nbsp;This can be observed in both physics (e.g.,&nbsp;a rolling ball gaining speed) and trading (e.g.,&nbsp;a strong price breakout leading to further momentum in that direction).</p></li></ul><p><strong>Differences:</strong></p><ul><li><p>Tangibility vs. abstract:&nbsp;Physics deals with tangible objects and forces,&nbsp;while trading deals with abstract concepts like prices,&nbsp;sentiment,&nbsp;and market expectations.</p></li><li><p>Predictability vs. complexity:&nbsp;Physical laws are relatively predictable,&nbsp;while market movements are complex and influenced by numerous factors,&nbsp;making precise predictions difficult.</p></li><li><p>Friction vs. market forces:&nbsp;Friction in physics slows down objects,&nbsp;while friction in trading can come from factors like transaction costs,&nbsp;profit-taking,&nbsp;and news events.</p></li><li><p>Limited lifespan vs. ongoing:&nbsp;Momentum in physics can eventually reach a steady state or dissipate entirely,&nbsp;while momentum in trading can last for varying periods depending on the market dynamics.</p></li></ul><p><strong>Trading applications of momentum:</strong></p><ul><li><p>Identifying trends:&nbsp;Traders can use momentum indicators like Moving Average Convergence Divergence (MACD) or Relative Strength Index (RSI) to identify trends and potential entry points.</p></li><li><p>Gauging market sentiment:&nbsp;Strong momentum can indicate dominant market sentiment,&nbsp;which can be used to inform trading decisions.</p></li><li><p>Risk management: Momentum can be used to set stop-loss orders and manage risk exposure during volatile periods.</p></li></ul>